KABUL, Afghanistan -- One of the principal owners of the Afghan bank at the center of an accelerating financial crisis here said depositors had withdrawn $180 million in the past two days. He predicted a "revolution" in the country's financial system unless the Afghan government and the United States moved quickly to help stabilize the bank. Khalil Frozi, one of the two largest shareholders of Kabul Bank, said reports indicating that the institution had lost as much as $300 million were overstated. But he predicted that if Afghan depositors continued to withdraw their money at the current rate, then Kabul Bank would almost certainly collapse -- undermining confidence in the nascent financial system Afghanistan has been trying to build with American help. "If people lose their trust in the banks, then we will have revolution in our financial system," Mr. Frozi said in an interview. "We need the Afghan government and the U.S. government to support us. That is essential." The news came as Afghan leaders took the first steps toward arresting the panic, which began earlier this week when the country's top banking officials demanded the resignations of Mr. Frozi, the bank's chief financial officer, and of the bank's chairman, Sherkhan Farnood.
KABUL, Afghanistan -- One of the principal owners of the Afghan bank at the center of an accelerating financial crisis here said depositors had withdrawn $180 million in the past two days. He predicted a "revolution" in the country's financial system unless the Afghan government and the United States moved quickly to help stabilize the bank.
Khalil Frozi, one of the two largest shareholders of Kabul Bank, said reports indicating that the institution had lost as much as $300 million were overstated. But he predicted that if Afghan depositors continued to withdraw their money at the current rate, then Kabul Bank would almost certainly collapse -- undermining confidence in the nascent financial system Afghanistan has been trying to build with American help.
"If people lose their trust in the banks, then we will have revolution in our financial system," Mr. Frozi said in an interview. "We need the Afghan government and the U.S. government to support us. That is essential."
The news came as Afghan leaders took the first steps toward arresting the panic, which began earlier this week when the country's top banking officials demanded the resignations of Mr. Frozi, the bank's chief financial officer, and of the bank's chairman, Sherkhan Farnood.
ederal Reserve Chairman Ben S. Bernanke said he regretted not saying in congressional testimony shortly after the failure of Lehman Brothers Holdings Inc. in 2008 that the central bank had no authority to save the firm. The testimony at the time "has supported this myth that we did have a way of saving Lehman," Bernanke said today in response to questions during a Financial Crisis Inquiry Commission hearing in Washington. "I regret not being more straightforward there because clearly it has supported the mistaken impression that in fact we could have done something." Bernanke made the remarks to explain the disparity between his September 2008 testimony that the Fed and U.S. Treasury "declined to commit public funds to support the institution" and later statements that the government had no option to save Lehman because of inadequate collateral. The Fed decided at the time against saying Lehman was unsalvageable because it may have risked further panic in financial markets, Bernanke said today.
ederal Reserve Chairman Ben S. Bernanke said he regretted not saying in congressional testimony shortly after the failure of Lehman Brothers Holdings Inc. in 2008 that the central bank had no authority to save the firm.
The testimony at the time "has supported this myth that we did have a way of saving Lehman," Bernanke said today in response to questions during a Financial Crisis Inquiry Commission hearing in Washington. "I regret not being more straightforward there because clearly it has supported the mistaken impression that in fact we could have done something."
Bernanke made the remarks to explain the disparity between his September 2008 testimony that the Fed and U.S. Treasury "declined to commit public funds to support the institution" and later statements that the government had no option to save Lehman because of inadequate collateral. The Fed decided at the time against saying Lehman was unsalvageable because it may have risked further panic in financial markets, Bernanke said today.
It may just be a few billion euros too far for Ireland's beleaguered taxpayers. Anglo Irish Bank Corp. said Aug. 31 it needs about 25 billion euros ($32.1 billion) in state funding, equivalent to about two-thirds of this year's tax revenue. Standard & Poor's, which last week cut the country's credit rating to AA-, said the state may have to inject as much as 35 billion euros. "It's like a bad dream where you're chasing something you can't catch up with," said Micheal O'Cearbhail, a retired television producer shopping in O'Connell Street, Dublin's main thoroughfare. "Eventually they'll have to close it down." Few places in the world encapsulate the global financial crisis more than Ireland as the country's decade-long economic boom came to a halt with the collapse of the property market.
It may just be a few billion euros too far for Ireland's beleaguered taxpayers.
Anglo Irish Bank Corp. said Aug. 31 it needs about 25 billion euros ($32.1 billion) in state funding, equivalent to about two-thirds of this year's tax revenue. Standard & Poor's, which last week cut the country's credit rating to AA-, said the state may have to inject as much as 35 billion euros.
"It's like a bad dream where you're chasing something you can't catch up with," said Micheal O'Cearbhail, a retired television producer shopping in O'Connell Street, Dublin's main thoroughfare. "Eventually they'll have to close it down."
Few places in the world encapsulate the global financial crisis more than Ireland as the country's decade-long economic boom came to a halt with the collapse of the property market.
The European Central Bank on Thursday said eurozone growth this year would be much stronger than previously expected, but betrayed worries about the outlook by warning that its forecasts could prove over-optimistic and extending into 2011 the supply of emergency liquidity to the region's banks.Jean-Claude Trichet, president, said the "very substantial" upward forecast revision followed an exceptional recent growth spurt. Although growth would cool in the second half of the year, he expected a continuing "positive underlying momentum" in the eurozone, and again ruled out a "double dip" back into recession.However, the ECB president surprised analysts by warning that risks to the outlook were "slightly tilted to the downside", indicating a lack of faith in the ECB staff's forecasts. Risks included weaker growth "in other advanced economies" - an obvious reference to the US, although Mr Trichet said the ECB had never expected "extraordinarily dynamic" growth on the other side of the Atlantic. The ECB's caution about its economic forecasts reflected fears about raising false expectations. For this year, it expected growth in a range with a midpoint of 1.6 per cent compared with 1 per cent anticipated in June. For 2011, it expected 1.4 per cent growth, compared with the 1.2 per cent expected previously.
Jean-Claude Trichet, president, said the "very substantial" upward forecast revision followed an exceptional recent growth spurt. Although growth would cool in the second half of the year, he expected a continuing "positive underlying momentum" in the eurozone, and again ruled out a "double dip" back into recession.
However, the ECB president surprised analysts by warning that risks to the outlook were "slightly tilted to the downside", indicating a lack of faith in the ECB staff's forecasts.
Risks included weaker growth "in other advanced economies" - an obvious reference to the US, although Mr Trichet said the ECB had never expected "extraordinarily dynamic" growth on the other side of the Atlantic.
The ECB's caution about its economic forecasts reflected fears about raising false expectations. For this year, it expected growth in a range with a midpoint of 1.6 per cent compared with 1 per cent anticipated in June. For 2011, it expected 1.4 per cent growth, compared with the 1.2 per cent expected previously.
Foreign companies are losing market share in China across a broad range of industries because of discriminatory treatment by the government and regulators, according to the European Chamber of Commerce in China.In its annual position paper, the organisation aired a host of complaints from its member companies and explicitly accused Beijing of violating its World Trade Organisation commitments through its heavy-handed certification requirements."Compulsory certification in excess of what is reasonable is being used to keep foreigners out of the market and business license requirements continue to exclude foreign companies from entire sectors," the group said.China uses business licensing to restrict foreign access to some sectors and applies "vague and unprecedentedly broad definitions of public security and critical infrastructure" in its certification of a wide range of products, the EU chamber said. This means foreign companies, particularly in industries like banking, transportation, IT and telecommunications, are often unable to get their products certified and so cannot sell them in China.
In its annual position paper, the organisation aired a host of complaints from its member companies and explicitly accused Beijing of violating its World Trade Organisation commitments through its heavy-handed certification requirements.
"Compulsory certification in excess of what is reasonable is being used to keep foreigners out of the market and business license requirements continue to exclude foreign companies from entire sectors," the group said.
China uses business licensing to restrict foreign access to some sectors and applies "vague and unprecedentedly broad definitions of public security and critical infrastructure" in its certification of a wide range of products, the EU chamber said.
This means foreign companies, particularly in industries like banking, transportation, IT and telecommunications, are often unable to get their products certified and so cannot sell them in China.
an awful lot of what they've done in terms of resource capture has been really smart. But they've screwed their water and agricultural land with pollution and global warming, yet they can't drink sand. keep to the Fen Causeway
Here is a graph from the Council of Foreign Relations blog: Greek Debt Crisis - Apocalypse Later Click on graph for larger image in new window.This graph from Paul Swartz at the CFR shows the default probabilities on three different dates: On April 30th, no European plan was yet in place to address the ballooning Greek debt, and default was considered a real possibility in the short term. On May 11th, just after the European Stabilization Mechanism (ESM) was announced, markets sharply cut their view on the odds of default across all time horizons. ... On September 1st, the market's view of the probability of default within two years was lower than before the ESM was announced, but higher over longer time frames.So initially the policy response lowered the default probabilities across all time frames (from red to light blue), but now - after further analysis - the default probabilities have increased for longer time frames (green).
Here is a graph from the Council of Foreign Relations blog: Greek Debt Crisis - Apocalypse Later Click on graph for larger image in new window.This graph from Paul Swartz at the CFR shows the default probabilities on three different dates:
On April 30th, no European plan was yet in place to address the ballooning Greek debt, and default was considered a real possibility in the short term. On May 11th, just after the European Stabilization Mechanism (ESM) was announced, markets sharply cut their view on the odds of default across all time horizons. ... On September 1st, the market's view of the probability of default within two years was lower than before the ESM was announced, but higher over longer time frames.
So initially the policy response lowered the default probabilities across all time frames (from red to light blue), but now - after further analysis - the default probabilities have increased for longer time frames (green).
Regulators are scrutinizing what some in the stock market are calling "quote stuffing," trading in which unusually large numbers of orders to buy or sell stocks are placed in a fraction of a second, only to be canceled almost immediately. The Securities and Exchange Commission has begun looking into whether the practice is putting some investors at a disadvantage by distorting stock prices, according to people familiar with the matter. The SEC is looking at what role, if any, quote stuffing played in the May 6 "flash crash," when the Dow Jones Industrial Average collapsed 700 points in minutes
The Securities and Exchange Commission has begun looking into whether the practice is putting some investors at a disadvantage by distorting stock prices, according to people familiar with the matter. The SEC is looking at what role, if any, quote stuffing played in the May 6 "flash crash," when the Dow Jones Industrial Average collapsed 700 points in minutes
Putting some investors at a disadvantage! How about everyone who does not have the latest HFT machine with the latest HFT algos co-located at the exchange? The SEC will have to think long and hard about this! As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
Leading UK and continental European companies are increasingly shunning banks from Spain, Italy and even Germany because they do not believe the Europe-wide stress testing of banks gave a true picture of their financial health.Corporate treasurers from groups with revenues of more than $240bn told the Financial Times they were conducting their own tests to gauge for themselves banks' robustness.
Corporate treasurers from groups with revenues of more than $240bn told the Financial Times they were conducting their own tests to gauge for themselves banks' robustness.
High-frequency trading: Up against a bandsawAt an industrial estate on the edge of Tseung Kwan O, a new town connected by road tunnel to Kowloon, work has started on a data centre where traders of stocks, futures, options and currencies will place their computers next to Hong Kong Exchanges' own systems....The concept - known as co-location - is growing fast. Last week, NYSE Euronext completed the move of trading in thousands of New York Stock Exchange-listed companies to a similar data centre in New Jersey....The speed with which exchanges are building such facilities is a sign of the global spread of a phenomenon gripping the markets: "high-frequency trading" (HFT). The phrase describes a style of electronic dealing that uses algorithms to dip automatically in and out of markets hundreds of times faster than the blink of a human eye....But like an invasive species in the natural world, HFT had grown rapidly before the wider public even noticed. Tabb Group, a consultancy, estimates that HFT now accounts for 56 per cent of all equity trades in the US and 38 per cent by value in Europe. ...Concern is therefore growing that the markets may be morphing into little more than a playground for a specialised type of trading that has minimal economic benefit and contributes little if anything to capital formation - the traditional function of stock exchanges.
At an industrial estate on the edge of Tseung Kwan O, a new town connected by road tunnel to Kowloon, work has started on a data centre where traders of stocks, futures, options and currencies will place their computers next to Hong Kong Exchanges' own systems....The concept - known as co-location - is growing fast. Last week, NYSE Euronext completed the move of trading in thousands of New York Stock Exchange-listed companies to a similar data centre in New Jersey....The speed with which exchanges are building such facilities is a sign of the global spread of a phenomenon gripping the markets: "high-frequency trading" (HFT). The phrase describes a style of electronic dealing that uses algorithms to dip automatically in and out of markets hundreds of times faster than the blink of a human eye....But like an invasive species in the natural world, HFT had grown rapidly before the wider public even noticed. Tabb Group, a consultancy, estimates that HFT now accounts for 56 per cent of all equity trades in the US and 38 per cent by value in Europe. ...Concern is therefore growing that the markets may be morphing into little more than a playground for a specialised type of trading that has minimal economic benefit and contributes little if anything to capital formation - the traditional function of stock exchanges.
fixed keep to the Fen Causeway
As the policy debate intensifies, investors might spare a thought for Takahashi Korekiyo, Bank of Japan governor from 1911 to 1913. He also served as finance minister and prime minister in the 1920s and 1930s.... However, in December 1931, Takahashi returned to the job of finance minister... A Keynsian by instinct Koreyiko reversed the tough, deflationary stance of his predecessor and fought recession with massive stimulus: he abandoned the gold standard, loosened credit conditions and raised public spending, financed with new debt.In some ways, it worked...But Takahashi encountered two problems... tensions continued to rise, partly because the large conglomerates, or zaibatsu, were the biggest winners from stimulus. Mitsui, for example, made millions of dollars from currency trading as Japan left the gold standard... Second, and unsurprisingly, the spending bonanza undermined confidence in Japan's government debt and its currency, creating fragility.So in 1936, Takahashi embarked on an exit strategy, cutting public spending and tightening monetary policy.From a macroeconomic perspective, it made sense. But it cost Takahashi his life. As political tensions exploded, he was assassinated by rogue army officers who were furious at - among other things - the military spending cuts. That triggered a slide towards militarism, wild public spending and hyperinflation.
But Takahashi encountered two problems... tensions continued to rise, partly because the large conglomerates, or zaibatsu, were the biggest winners from stimulus. Mitsui, for example, made millions of dollars from currency trading as Japan left the gold standard...
Second, and unsurprisingly, the spending bonanza undermined confidence in Japan's government debt and its currency, creating fragility.
So in 1936, Takahashi embarked on an exit strategy, cutting public spending and tightening monetary policy.
From a macroeconomic perspective, it made sense. But it cost Takahashi his life. As political tensions exploded, he was assassinated by rogue army officers who were furious at - among other things - the military spending cuts. That triggered a slide towards militarism, wild public spending and hyperinflation.
What does that even mean? Wait this is important. Someone is wrong on the Internet.
Ireland, simply put, appears insolvent under plausible scenarios with current policies. The idea that Ireland, Greece or Portugal can cut spending and grow out of overvalued exchange rates with still large budget deficits, while servicing all their debts and building more debt, is proving - not surprisingly - wrong. Such policies leave nations burdened with large debt overhangs that effectively tax businesses and borrowers - because interest rates must stay high to reflect risk. Investors must wonder whether businesses and homeowners can afford these higher interest rates, so banks and investors cut credit lines and reduce lending. This strangles economies, even when the fiscal authorities take tough steps needed to cut deficits.
Investors must wonder whether businesses and homeowners can afford these higher interest rates, so banks and investors cut credit lines and reduce lending. This strangles economies, even when the fiscal authorities take tough steps needed to cut deficits.
Under the current program, we estimate each Irish family of four will be liable for 200,000 euros in public debt by 2015. There are only 73,000 children born into the country each year, and these children will be paying off debts for decades to come - as well as needing to accept much greater austerity than has already been implemented. There is no doubt that social welfare systems, health care and education spending will decline sharply. Watch for renewed emigration from a famously footloose population. If current policies continue, the calamity of the Irish banking system will lead to a much deeper recession and the consequences will be felt for decades. Watch also for further global financial disruption as this kind of deal starts to unravel.
Watch for renewed emigration from a famously footloose population. If current policies continue, the calamity of the Irish banking system will lead to a much deeper recession and the consequences will be felt for decades. Watch also for further global financial disruption as this kind of deal starts to unravel.
